How Much Life Insurance Do I Need?


Like so many insurance questions, the answer depends. How much life insurance do you need? It depends on a lot of factors, but let's try and simplify things a little bit. The principles of life insurance is that you're looking to insure against the financial impact of your family losing your income. As a result, you should look at where you are to figure out what you need to accomplish. The short answer is that you should have 10 to 12 times your annual salary, but you can get as detailed as you want when figuring out requirements. Let's look at an example.

Let's say you're a 35-year-old male with a wife and children aged five and eight. You make $50,000 per year in annual income. You have a $250,000 house and you owe $175,000 on your mortgage.

You could decide you need to leave your wife 10 times your annual income, or $500,000. With that, she could pay off the house and still have $325,000 to pay off cars or cover ongoing living expenses.

That's a good start, but what about college for the kids? Would you like to fund that as well? Let's say that's another $200,000 per child. So, now we're at $900,000 in coverage.

You probably have a little bit of life insurance through your job as well, so that likely brings you really close to $1 million in overall life insurance coverage.

Of course, it all depends on what it costs, right? Let's not wait to find out because you're probably overestimating the cost. 80% of Americans overestimate the cost of life insurance. That's a fact.

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